Cair Medical, Inc. v. Sylvia Mathews Burwell

NOTICE OF MOTION AND MOTION for Summary Judgment as to Final Agency Action

C.D. Cal.July 11, 2016

PLAINTIFF CAIR MEDICAL, INC.’S NOTICE OF MOTION RE SUMMARY JUDGMENT 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL J. KHOURI, ESQ. [SBN 97654] Email: mkhouri@khourilaw.com ANDREW B. GOODMAN, ESQ. [SBN 267972] Email: agoodman@khourilaw.com KHOURI LAW FIRM 4040 Barranca Parkway, Suite 280 Irvine, California 92604 Telephone: (949) 336-2433 Fax: (949) 387-0044 Attorneys for plaintiff CAIR MEDICAL, INC. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION CAIR MEDICAL, INC., a California corporation, Plaintiff, vs. SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, Defendant. Case No. 8:15-cv-01677-DOC-KES PLAINTIFF CAIR MEDICAL, INC.’S NOTICE OF MOTION FOR SUMMARY JUDGMENT [Memorandum of Points and Authorities, Statement of Uncontroverted Facts and Conclusions of Law, and [Proposed] Judgment submitted concurrently] Hearing date: September 26, 2016 Time: 8:30 AM Place: Courtroom 9D Judge: Hon. David O. Carter Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 1 of 26 Page ID #:342 PLAINTIFF CAIR MEDICAL, INC.’S NOTICE OF MOTION RE SUMMARY JUDGMENT 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: PLEASE TAKE NOTICE that on September 26, 2016 at 8:30 AM, in Courtroom 9D of the above-entitled Court, located at 411 West Fourth Street, Santa Ana, CA 92701-4516, plaintiff CAIR MEDICAL, INC. (“Cair Medical”), by way of the concurrently filed Motion for Summary Judgment, will seek judicial review of the final agency action of defendant SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services (“Burwell”). This action arises under Title XVIII of the Social Security Act, 42 U.S.C. §§ 1395, et seq. (the “Medicare Act”), and 5 U.S.C. §§ 551, et seq. (the Administrative Procedure Act, or “APA”). Before filing the concurrently filed Motion for Summary Judgment, no conference of counsel under L.R. 7-3 was necessary because this case is listed as exempt under L.R. 16-12(b) (“Actions for judicial review of a decision by the Commissioner of Social Security under 42 U.S.C. § 405(g)”). See 42 U.S.C. § 1395ff(b)(1)(A); 42 U.S.C. § 405(g). Moreover, Cair Medical and Burwell stipulated to a briefing schedule, which the Court adopted on April 20, 2016 in its Order Setting Hearing Date and Briefing Schedule. (Document 21.) /// Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 2 of 26 Page ID #:343 PLAINTIFF CAIR MEDICAL, INC.’S NOTICE OF MOTION RE SUMMARY JUDGMENT 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cair Medical is asking the Court – upon review of the pleadings and Certified Administrative Record (“CAR”), the concurrently filed Memorandum of Points and Authorities, the concurrently filed Statement of Uncontroverted Facts and Conclusions of Law, and any additional evidence that may be judicially noticed or received at the hearing – to hold unlawful and set aside Burwell’s final decision; or, alternatively, to remand this matter for rehearing. The specific grounds for this motion, as will be discussed in more detail in the concurrently filed Memorandum of Points and Authorities, are that, under the APA, Burwell’s decision is arbitrary, capricious, an abuse of discretion, and not in accordance with law; and is unsupported by the substantial evidence in the record. 5 U.S.C. §§ 706(2)(A), (E). DATED: July 11, 2016 Respectfully submitted, KHOURI LAW FIRM By: /s/ Andrew B. Goodman MICHAEL J. KHOURI Email: mkhouri@khourilaw.com ANDREW B. GOODMAN Email: agoodman@khourilaw.com Attorneys for plaintiff, CAIR MEDICAL, INC. Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 3 of 26 Page ID #:344 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL J. KHOURI, ESQ. [SBN 97654] Email: mkhouri@khourilaw.com ANDREW B. GOODMAN, ESQ. [SBN 267972] Email: agoodman@khourilaw.com KHOURI LAW FIRM 4040 Barranca Parkway, Suite 280 Irvine, California 92604 Telephone: (949) 336-2433 Fax: (949) 387-0044 Attorneys for plaintiff CAIR MEDICAL, INC. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION CAIR MEDICAL, INC., a California corporation, Plaintiff, vs. SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, Defendant. Case No. 8:15-cv-01677-DOC-KES PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT [Notice of Motion, Statement of Uncontroverted Facts and Conclusions of Law, and [Proposed] Judgment submitted concurrently] Hearing date: September 26, 2016 Time: 8:30 AM Place: Courtroom 9D Judge: Hon. David O. Carter Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 4 of 26 Page ID #:345 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT i 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF CONTENTS PAGE I. INTRODUCTION………………………………………………………….1 II. FACTUAL SUMMARY…………………………………………………...2 A. Cair Medical…………………………………………………………2 B. Patient N.T…………………………………………………………...3 C. Unfavorable results for Cair Medical on redetermination……….3 D. Unfavorable results for Cair Medical on reconsideration………..3 E. Todd Tucker testifies at hearing on behalf of Cair Medical……...4 F. ALJ Gutierrez issues a fully favorable decision…………………...4 G. Medicare reviews ALJ Gutierrez’ decision on its own accord…...5 H. Cair Medical exhausts its administrative remedies……………….6 III. LEGAL DISCUSSION…………………………………………………….6 A. This Court has jurisdiction to review Burwell’s August 14, 2015 final decision…………………………………………………………6 B. General standards on summary judgment………………………...7 C. Appropriate level of deference to Burwell’s interpretation of the Medicare Act: minimum to none…………………………………...8 1. Chevron, Mead, Barnhart, and Skidmore……………………8 2. The precise question at issue…………………………………9 3. Burwell’s interpretation of the Medicare Act is not based on a permissible construction of the statutory scheme………...9 4. Burwell’s interpretation of the Medicare Act should be afforded minimal, if any, deference under Skidmore……..11 D. Burwell’s August 14, 2015 decision is unsupported by substantial evidence……………………………………………………………..12 E. Burwell’s August 14, 2015 decision is not in accordance with law…………………………………………………………………..13 Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 5 of 26 Page ID #:346 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT ii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 F. Burwell’s August 14, 2015 decision is an abuse of discretion…...14 G. Burwell’s August 14, 2015 decision is arbitrary and capricious..15 IV. CONCLUSION…………………………………………………………....17 Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 6 of 26 Page ID #:347 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT iii 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TABLE OF AUTHORITIES PAGE Cases Albert v. Burwell 118 F.Supp.3d 505 (E.D.N.Y. 2015)……………………………………………….9 Anderson v. Liberty Lobby, Inc. 477 U.S. 242 (1986)……………………………………………………………..…7 Auer v. Robbins 519 U.S. 452 (1997)………………………………………………………………..8 Babbitt v. Sweet Home Chapter of Communities for a Great Oregon 515 U.S. 687 (1995)………………………………………………….…………...10 Barnhart v. Walton 535 U.S. 212 (2002)………………………………………………………….…….8 Beck v. PACE Int’l Union 551 U.S. 96 (2007)……………………………………………………….……….10 Burlington Northern & Santa Fe Ry. v. White 126 S.Ct. 2405 (2006)………….………………………………………...……..9, 11 Celotex Corp. v. Catrett 477 U.S. 317 (1986)…………………………………………………………….….7 Chevron v. Natural Res. Def. Council, Inc. 467 U.S. 837 (1984)………………………………………………………………..8 Cmty Health Ctr. v. Wilson-Coker 311 F.3d 132 (2d Cir. 2002)………………………………………………………..9 Consolo v. Federal Maritime Commission 383 U.S. 607 (1966)………….…………………………………………………...12 Delbon Radiology v. Turlock Diagnostic Ctr. 839 F.Supp. 1388 (E.D. Cal. 1993)……………….……………………………..7, 8 Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 7 of 26 Page ID #:348 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT iv 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Department of Wildlife Conservation v. Jantzen 621 F.Supp. 838 (S.D. Miss. 1985)…….…………………………………………13 Fontenot v. Upjohn Co. 780 F.2d 1190 (5th Cir. 1986)…………………………………………….………..7 Heckler v. Ringer 466 U.S. 602 (1984)………………………………………………………..6, 10, 15 Hydro Res., Inc. v. United States EPA 608 F.3d 1131 (10th Cir. 2010)…………………………………………………..13 In Home Health, Inc. v. Shalala 188 F.3d 1043 (8th Cir. 1999)…………………………………………………….13 Lugot v. Harris 499 F.Supp. 1118 (D. Nev. 1980)……………………………….………………….8 Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co. 463 U.S. 29 (1983)……………………….………….………………………..15, 16 Ness Investment Corp. v. United States Dept. of Agriculture 512 F.2d 706 (9th Cir. 1975)………………………………………...……………14 Prinzi v. Keydril Co. 738 F.2d 707………………………………………………………………………..8 Puerto Rico Sun Oil Co. v. EPA 8 F.3d 73 (1st Cir. 1993)…………………….…………………………………….15 Refrigerated Transport Co., Inc. v. ICC 616 F.2D 748 (5th Cir. 1981)……………………………………………………..12 Skidmore v. Swift & Co. 323 U.S. 134 (1944)……………………………….………………………..….9, 11 Strickland v. Morton 519 F.2d 467 (9th Cir. 1975)……………………………………………………...14 Southern Calif. Gas Co. v. City of Santa Ana 336 F.3d 885 (9th Cir. 2003)………………………………………………...……..7 Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 8 of 26 Page ID #:349 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT v 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 United States v. Mead Corp. 533 U.S. 218 (2001)……………………………………………………………..8, 9 Universal Camera Corp. v. NLRB 340 U.S. 474 (1950)……………………………………………..……………….12 Vierra v. Rubin 915 F.2d 1372 (9th Cir. 1990)……………………………………….……………..7 Yale-New Haven Hosp. v. Leavitt 470 F.3d 71 (2d Cir. 2006)…………….………………………………….10, 14, 15 Statutes 28 U.S.C. § 1361…………………………………………………………….……..6 28 U.S.C. § 1391(e)……………………………………………………...………6, 7 42 U.S.C. § 405(g)…………………………………………………………...……..7 42 U.S.C. § 1395ff(a)……………………………………………………..…..10, 14 42 U.S.C. §§ 1395ff(b)(1)(A)……………………………………………...……….7 42 U.S.C. §§ 1395ff(b)(1)(E)(i)…………………………………………………….7 42 U.S.C. §§ 1395ff(b)(2)(C)(iii)……………………………………….………….7 42 U.S.C. § 1395x(n)………………………………………………....…...10, 14, 15 42 U.S.C. § 1395y(a)(1)(A)…………………………………………….2, 10, 14, 15 Federal Rules Fed. R. Civ. P. 56(a)………………………………………………….…………….7 Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 9 of 26 Page ID #:350 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MEMORANDUM OF POINTS AND AUTHORITIES I. INTRODUCTION This case arises out of a lengthy back-and-forth dispute over whether the Medicare program covers a tilt-space manual wheelchair for beneficiary N.T. Cair Medical provided N.T. with a tilt-space manual wheelchair on June 8, 2011. Cair Medical, as part of its standard operating procedure, contacted the billing department at Meadowood Nursing Center to obtain written verification that N.T. was on Medicare Part B custodial care. Cair Medical cross-checked Meadowood Nursing Center’s written verification with a separate website called Connex. After completing its due diligence, to ensure that N.T. was on Medicare Part B custodial care, Cair Medical billed Medicare for Durable Medical Equipment (“DME”), and was initially reimbursed for the charges. On redetermination and reconsideration, Cair Medical received unfavorable rulings. When Cair Medical presented evidence in a de novo hearing before an Administrative Law Judge (“ALJ”), however, it received a fully favorable decision. ALJ Gutierrez’ April 6, 2015 decision took into account the evidence contained in the Certified Administrative Record. The Medicare Appeals Council decided to review this fully favorable decision on its own motion because it believed that the ALJ made an error of law material to the outcome of the matter. The present Motion for Summary Judgment challenges the Medicare Appeals Council’s August 14, 2015 final decision and reasoning. The crux of the dispute is whether the Medicare Appeals Council was correct in interpreting the Medicare Act to require, as a precondition to payment, that N.T. was not residing in a skilled nursing facility, or a “distinct part” of a skilled nursing facility. In terms of the statutory scheme of the Medicare Act, the specific issue is whether the definition of “durable medical equipment” must be considered before the mandatory exclusionary language of the so-called “reasonable and necessary” requirement. Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 10 of 26 Page ID #:351 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Cair Medical submits that the mandatory exclusionary language of the “reasonable and necessary” requirement must be considered first. The Medicare Act explicitly provides that: “Notwithstanding any other provision of this title, no payment may be made under Part A or Part B for any expenses incurred for items or services—which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, . . .” 42 U.S.C. § 1395y(a)(1)(A) (emphases added). To the extent that the Medicare Appeals Council’s August 14, 2015 decision analyzes the definition of “durable medical equipment” first, this Court should give minimal, if any, deference to this agency interpretation. Burwell’s interpretation of the Medicare Act is unsupported by substantial evidence; not in accordance with law; an abuse of discretion; and arbitrary and capricious. Consequently, Cair Medical respectfully requests that this Court enter judgment in Cair Medical’s favor, holding unlawful and setting aside Burwell’s August 14, 2015 action, findings, and conclusions; and remanding this action to Burwell with instruction to have the Medicare contractor process the claim to Cair Medical in accordance with ALJ Gutierrez’ April 6, 2015 decision. Alternatively, Cair Medical respectfully requests that judgment be entered in its favor, reversing Burwell’s August 14, 2015 decision and remanding the case for rehearing. II. FACTUAL SUMMARY A. Cair Medical Cair Medical’s business is 100 percent tilt-space manual wheelchairs, and only in skilled nursing facilities for Medicare patients. (Undisputed Fact (“UF”) 1.) To verify a patient’s eligibility – because Cair Medical can only bill Medicare Part B, and that status changes often – before Cair Medical even starts the process, they contact the billing department at a skilled nursing facility, and get something in writing saying that the patient is on Medicare Part B custodial care. (UF 2.) Cair Medical will even cross check the skilled nursing facility’s written representation Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 11 of 26 Page ID #:352 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 with the Connex website. (UF 3.) Cair Medical’s process of verifying patients’ status and eligibility for Medicare Part B is standard operating procedure. (UF 4.) B. Patient N.T. Patient N.T.’s last day on Medicare Part A at Meadowood Nursing Center was March 10, 2011, as also confirmed on the Connex website. (UF 5.) Patient N.T. was evaluated for a custom tilt-in space wheelchair on or around May 24, 2011 at Meadowood Nursing Center. (UF 6.) The medical evaluation of patient N.T. concluded that N.T. would require a manual tilt-in space wheelchair with custom seating and back supports. (UF 7.) Cair Medical verified in writing that Patient N.T. was under a long-term care, distinct custodial Medicare Part B stay on June 8, 2011 at Meadowood Nursing Center. (UF 8.) On June 8, 2011, Cair Medical provided patient N.T. with a manual tilt-in space wheelchair, billed Medicare for DME, and was initially reimbursed for the charges. (UF 9.) C. Unfavorable results for Cair Medical on redetermination On November 21, 2011, Noridian Administrative Services sent Cair Medical notification of a Medicare payment error, which resulted in an overpayment determination for patient N.T. (and others) because records indicated that the patient was a resident of a skilled nursing facility on the date of service billed. (UF 10.) Cair Medical subsequently submitted a redetermination request with supporting documentation, which was received on January 6, 2012 by Noridian Administrative Services. (UF 11.) On February 2, 2012, Cair Medical received an unfavorable decision on its redetermination from Noridian Administrative Services regarding the $3,678.65 overpayment amount for Medicare beneficiary N.T. (UF 12.) On February 28, 2012, Cair Medical submitted a formal reconsideration request via letter to C2C Solutions, Inc. (UF 13.) D. Unfavorable results for Cair Medical on reconsideration On June 1, 2012, C2C Solutions, Inc. issued an unfavorable decision on Cair Medical’s appeal. (UF 14.) On July 26, 2012, Cair Medical submitted a Request Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 12 of 26 Page ID #:353 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 for Medicare Hearing by an ALJ. (UF 15.) E. Todd Tucker testifies at hearing on behalf of Cair Medical Todd Tucker, president of Cair Medical, appeared on behalf of Cair Medical before ALJ Roberto Gutierrez on August 26, 2014 for a de novo hearing, in which the QIC was provided written notice but did not respond. (UF 16.) ALJ Gutierrez admitted Exhibits 1 (procedural documents), 2 (medical records), and 3 (notice of hearing) into the record without objection. (UF 17.) Mr. Tucker testified on behalf of Cair Medical that, according to section 3, p. 29 of Medicare’s medical coverage of durable medical equipment and other devices, a long-term care facility can qualify as your home, which was what patient N.T. was in. (UF 18.) Mr. Tucker further testified on behalf of Cair Medical by referring to section 1, p. 25, chapter 20 of the Medicare Claims Processing Manual. (UF 19.) Mr. Tucker additionally testified that Cair Medical had a letter from the director of nursing stating that, at the time, the patient was definitely in a distinct unit. (UF 20.) F. ALJ Gutierrez issues a fully favorable decision On April 6, 2015, ALJ Gutierrez issued a fully favorable decision to Cair Medical, in which he directed the Medicare contractor to process the claim in accordance with his decision. (UF 21.) ALJ Gutierrez reviewed the documentation submitted by Cair Medical and the testimony of Todd Tucker. (UF 22.) ALJ Gutierrez pointed out that neither the contractor nor the QIC provided evidence to support their findings that the beneficiary was residing in a skilled nursing facility at the time the wheelchair and accessories were provided. (UF 23.) ALJ Gutierrez found that Cair Medical provided a letter from the facility which clearly outlines that the beneficiary was at the skilled nursing facility under custodial care on the date of service; and that the printouts from the contractor portal confirmed that the Medicare beneficiary was discharged from a skilled nursing facility stay on March 10, 2011, and had not been under a Part A stay since that time. (UF 24.) Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 13 of 26 Page ID #:354 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 ALJ Gutierrez found that based on this evidence, Medicare beneficiary N.T. was a long-term resident at the facility and not under a Part-A stay on the June 8, 2011 date of service. (UF 25.) ALJ Gutierrez concluded that Medicare beneficiary N.T. was not under a Part-A episode of care on June 8, 2011, and the wheelchair and accessories are covered by Medicare; therefore, Cair Medical was entitled to payment at the Medicare allowable amount for the DME provided. (UF 26.) G. Medicare reviews ALJ Gutierrez’ decision on its own accord On May 29, 2015, Medicare’s Administrative Qualified Independent Contractor (AdQIC) referred ALJ Gutierrez’ April 6, 2015 decision and related claim file to the Medicare Appeals Council for possible review on the Council’s own motion. (UF 27.) The AdQIC reasoned, in its May 29, 2015 memorandum, that ALJ Gutierrez failed to: (1) first determine whether the item fell within a statutory Medicare benefit category, and (2) recognize and apply Sections 1861(n) and 1819(a)(1) of the Social Security Act, which resulted in an error of law material to the outcome of Cair Medical’s claim. (UF 28.) On or around June 17, 2015, Cair Medical, through counsel, submitted written exceptions to the AdQIC’s May 29, 2015 referral to the Medicare Appeals Council, and provided documentation for why there was no error of law material to the outcome of Cair Medical’s claim. (UF 29.) On August 14, 2015, the Medicare Appeals Council notified Cair Medical that, on its own motion, it decided to review ALJ Gutierrez’ April 6, 2015 decision. (UF 30.) The Medicare Appeals Council stated that, “[t]he Council has received no response from the appellant.” (UF 31.) The record reflects that Cair Medical served the AdQIC and Medicare Appeals Council with its written exceptions via mail on June 18, 2015, and they were received on June 23, 2015. (UF 32.) The Medicare Appeals Council reasoned that: “Assessed in the context of the applicable coverage authorities, the record indicates that, on the date of service in issue, the beneficiary was a long term resident in a SNF, as defined in section Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 14 of 26 Page ID #:355 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1819(a)(1).” (UF 33.) The Medicare Appeals Council concluded that: “Contrary to the ALJ’s conclusion, Medicare Part B coverage of the wheelchair and accessories at issue is barred by statute, because those items do not meet the definition of items used in the home under section 1861(n).” (UF 34.) The Medicare Appeals Council ultimately reversed ALJ Gutierrez’ decision, and found that, “the wheelchair and accessories provided to the beneficiary on June 8, 2011[] are not covered by Medicare under Section 1861(n) of the Act.” (UF 35.) H. Cair Medical exhausts its administrative remedies As a result of the Medicare Appeals Council’s August 14, 2015 decision, Cair Medical was entitled to judicial review. (UF 36.) After exhausting all administrative remedies, on October 19, 2015, Cair Medical timely filed a complaint in the present Court seeking judicial review of the Medicare Appeals Council’s August 14, 2015 decision. (UF 37.) III. LEGAL DISCUSSION A. This Court has jurisdiction to review Burwell’s August 14, 2015 final decision Pursuant to her rulemaking authority, the Secretary (Burwell) has provided that a “final decision” is rendered on a Medicare claim only after the individual claimant has pressed its claim through all designated levels of administrative review. Heckler v. Ringer, 466 U.S. 602, 606 (1984). If the Medicare Appeals Council also denies the claim, and the claim exceeds $1,000, only then may the claimant seek judicial review in federal district court of the “Secretary’s final decision.” Id. at 607 (citations omitted). Cair Medical has pressed its claim through all designated levels of administrative review, including the Medicare Appeals Council, which reviewed Cair Medical’s claim on its own motion. (UF 10-37.) The amount in controversy ($3,678.65) exceeds $1,000. (UF 12.) Therefore, this Court has jurisdiction to review Burwell’s August 14, 2015 final decision. 28 U.S.C. § 1361, 28 U.S.C. § Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 15 of 26 Page ID #:356 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1391(e), 42 U.S.C. § 405(g), 42 U.S.C. §§ 1395ff(b)(1)(A), (b)(1)(E)(i), (b)(2)(C)(iii). B. General standards on summary judgment The burden of persuasion at trial is usually determined by the pleadings; therefore, on a summary judgment motion, the moving party must generally demonstrate that there is no triable issue as to the matters alleged in its own pleadings. See, e.g., Southern Calif. Gas Co. v. City of Santa Ana, 336 F.3d 885, 888 (9th Cir. 2003). If the evidence offered in support of the motion for summary judgment establishes every essential element of the moving party’s claim or defense, there is no need to offer evidence to negate or disprove matters on which the opposing party has the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). “In ruling on a motion for summary judgment, the judge must view the evidence presented through the prism of the substantive evidentiary burden.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 254 (1986). The basic standard for granting summary judgment is that the court must find that there is no genuine dispute as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). Alternatively, the moving party (plaintiff) may carry its initial burden on summary judgment by showing that there is a lack of any genuine dispute of material fact as to affirmative defenses asserted by the defendant. Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986). Summary judgment is proper, however, only after adequate opportunity for discovery so that no serious claim can be made that the losing party was railroaded by a premature motion for summary judgment. Celotex, supra, 477 U.S. at 326. When the historical facts controlling the application of a rule of law are undisputed, the application raises a question of law for the court, and summary judgment is appropriate in such cases. See Vierra v. Rubin, 915 F.2d 1372, 1376 (9th Cir. 1990); Delbon Radiology v. Turlock Diagnostic Ctr., 839 F.Supp. 1388, Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 16 of 26 Page ID #:357 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 1391 (E.D. Cal. 1993); see also Lugot v. Harris, 499 F.Supp. 1118, 1119-20 (D. Nev. 1980) (“The findings of fact and inferences drawn from such facts are conclusive if they are supported by substantial evidence in the record. . . . The determination of substantiality is a question of law and therefore a proper issue to raise by summary judgment”). Summary judgment is proper where the dispute is of a type normally decided by the court and not a jury. See, e.g., Prinzi v. Keydril Co., 738 F.2d 707 (where material facts undisputed, worker’s status as Jones Act “seaman” decided on summary judgment). C. Appropriate level of deference to Burwell’s interpretation of the Medicare Act: minimum to none 1. Chevron, Mead, Barnhart, and Skidmore The seminal case of Chevron v. Natural Res. Def. Council, Inc., 467 U.S. 837 (1984) requires reviewing courts to apply a two-step framework to questions of statutory construction. First, the Court inquires, “whether Congress has directly spoken to the precise question at issue,” in which case the Court “must give effect to the unambiguously expressed intent of Congress.” Id. at 842-43. If the “statute is silent or ambiguous with respect to the specific issue,” the Court moves to the second step and must defer to the agency’s interpretation if it is “based on a permissible construction of the statute.” Id. at 843. The question of whether Chevron’s strong form of deference applies is not an easy one. After United States v. Mead Corp., 533 U.S. 218 (2001) and Barnhart v. Walton, 535 U.S. 212 (2002), determining when an agency interpretation that is not embodied explicitly in a congressionally-authorized regulation deserves Chevron deference has become a complex task. Agency interpretation of its own regulations is controlling unless “plainly erroneous or inconsistent with the regulation.” Auer v. Robbins, 519 U.S. 452, 461-63 (1997). The waters are muddier still in the Medicare context because, “[i]n cases such as this, where a highly expert agency administers a large and complex regulatory scheme in cooperation Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 17 of 26 Page ID #:358 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 with many other institutional actors, the various possible standards for deference begin to converge.” Albert v. Burwell, 118 F.Supp.3d 505, 512 (E.D.N.Y. 2015) (quoting Cmty Health Ctr. v. Wilson-Coker, 311 F.3d 132, 138 (2d Cir. 2002)). Even if full-blown Chevron deference is not due, courts will still accord a modified level of respect because “Chevron did nothing to eliminate Skidmore’s holding that an agency’s interpretation may merit some deference whatever its form.” Mead, supra, 533 U.S. at 234. Thus, an agency’s interpretation is still entitled to respect according to its persuasiveness, based upon, “the thoroughness evident in its [the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944). Agency views that are shifting or insufficiently developed, however, have little or no persuasive value. Burlington Northern & Santa Fe Ry. v. White, 126 S.Ct. 2405, 2413-14 (2006). 2. The precise question at issue The precise question that appears to be at issue in this case is summarized in the AdQIC’s May 29, 2015 memorandum. The AdQIC reasoned, in its May 29, 2015 memorandum, that ALJ Gutierrez failed to: (1) first determine whether the item fell within a statutory Medicare benefit category, and (2) recognize and apply Sections 1861(n) and 1819(a)(1) of the Social Security Act, which resulted in an error of law material to the outcome of Cair Medical’s claim. (UF 28.) The precise question thus appears to be whether the Medicare statutory scheme requires, as the first step in the coverage analysis here, an application of Sections 1861(n) and 1819(a)(1) of the Social Security Act. 3. Burwell’s interpretation of the Medicare Act is not based on a permissible construction of the statutory scheme With a few exceptions, the Medicare Act does not specify which devices are covered or excluded from coverage. Broad wording excludes from Medicare Part Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 18 of 26 Page ID #:359 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 A or Part B coverage, “any expenses incurred for items or services—which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, . . .” 42 U.S.C. § 1395y(a)(1)(A). Burwell is responsible for specifying those services that are covered under the “reasonable and necessary” standard (see 42 U.S.C. § 1395ff(a)), and has wide discretion in selecting the means for doing so, traditionally acting through formal regulations and (informal) instructional manuals and letters. Yale-New Haven Hosp. v. Leavitt, 470 F.3d 71, 73 (2d Cir. 2006) (citing Heckler, supra, 466 U.S. at 617). The Medicare Act is clear in its exclusionary mandate—“Notwithstanding any other provision of this title, no payment may be made under Part A or Part B for any expenses incurred for items or services—which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, . . .” 42 U.S.C. § 1395y(a)(1)(A) (emphases added). The Medicare Act does not appear to be silent or ambiguous on the precise question at issue, rendering the second step of the Chevron analysis likely moot. Regardless, Burwell’s reliance on the definition of “durable medical equipment,” in section 1861(n) of the Social Security Act (42 U.S.C. § 1395x(n)) is not based on a permissible construction of the overall statutory scheme of the Medicare Act. Burwell is simply wrong in prioritizing the definition of “durable medical equipment” over the fundamental “reasonable and necessary” requirement. A well-settled canon of statutory construction is to avoid interpreting a provision in a way that is inconsistent with the overall structure of the statute (See Beck v. PACE Int’l Union, 551 U.S. 96 (2007)), or with another provision (See Babbitt v. Sweet Home Chapter of Communities for a Great Oregon, 515 U.S. 687 (1995)). Here, Burwell violates both canons of statutory construction (UF 33-35), whereas ALJ Gutierrez does not (UF 16-26). Because Burwell’s interpretation of the Medicare Act impermissibly prioritizes the definition of “durable medical Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 19 of 26 Page ID #:360 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 equipment” over the fundamental “reasonable and necessary” requirement, if the Court even goes to the second step of the Chevron analysis, the Court should not give Chevron deference to Burwell’s erroneous interpretation. 4. Burwell’s interpretation of the Medicare Act should be afforded minimal, if any, deference under Skidmore Under Skidmore, an agency’s interpretation is still entitled to respect according to its persuasiveness, based upon, “the thoroughness evident in its [the agency’s] consideration, the validity of its reasoning, its consistency with earlier and later pronouncements, and all those factors which give it power to persuade, if lacking power to control.” Skidmore, supra, 323 U.S. at 140 (1944). Agency views that are shifting or insufficiently developed, however, have little or no persuasive value. Burlington Northern & Santa Fe Ry., supra, 126 S.Ct. at 2413-14 (2006). In the present case, Cair Medical faults Burwell for the lack of thoroughness evident in the August 14, 2015 decision, as exemplified by the lack of consideration for Cair Medical’s written exceptions, served via mail on June 18, 2015 and received on June 23, 2015. (UF 31-32.) For the same reasons discussed above, Cair Medical does not believe that Burwell’s reasoning, in interpreting the Medicare Act, was valid. In addition, a review of the entire CAR shows a marked lack of consistency with earlier pronouncements in the Medicare appeal process. Cair Medical received an overpayment determination (UF 10); an unfavorable decision on redetermination (UF 12) and reconsideration (UF 14); a fully favorable decision (UF 21); and finally a reversal of the fully favorable decision based on an impermissible interpretation of the Medicare Act (UF 35). In light of Burwell’s minimal amount of persuasiveness, this Court, under Skidmore, should give Burwell’s interpretation of the Medicare Act minimal, if any, deference. /// Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 20 of 26 Page ID #:361 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 12 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 D. Burwell’s August 14, 2015 decision is unsupported by substantial evidence Substantial evidence is “such relevant evidence as a reasonable mind might accept as adequate to support a conclusion.” Refrigerated Transport Co., Inc. v. ICC, 616 F.2D 748, 751 (5th Cir. 1981). It is something more than a scintilla of evidence, but something less than the weight of the evidence; the “possibility of drawing two inconsistent conclusions from the evidence does not prevent an administrative agency’s findings from being supported by substantial evidence.” Consolo v. Federal Maritime Commission, 383 U.S. 607, 620 (1966). When reviewing the evidence supporting the agency’s findings, the Court must review the record as a whole, including the administrative law judge’s initial decision, and consider portions of the record which reasonably detract from the supporting evidence. Universal Camera Corp. v. NLRB, 340 U.S. 474, 488 (1950). The record as a whole does not contain substantial evidence supporting Burwell’s August 14, 2015 decision. If anything, the weight of the evidence and proper interpretation of the Medicare Act support ALJ Gutierrez’ fully favorable decision. Todd Tucker, president of Cair Medical, appeared on behalf of Cair Medical before ALJ Roberto Gutierrez on August 26, 2014 for a de novo hearing, in which the QIC was provided written notice but did not respond. (UF 16.) Mr. Tucker testified on behalf of Cair Medical that, according to section 3, p. 29 of Medicare’s medical coverage of durable medical equipment and other devices, a long-term care facility can qualify as your home, which was what patient N.T. was in. (UF 18.) Mr. Tucker further testified on behalf of Cair Medical by referring to section 1, p. 25, chapter 20 of the Medicare Claims Processing Manual. (UF 19.) Mr. Tucker additionally testified that Cair Medical had a letter from the director of nursing stating that, at the time, the patient was definitely in a distinct unit. (UF 20.) ALJ Gutierrez pointed out that neither the contractor nor the QIC provided Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 21 of 26 Page ID #:362 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 13 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 evidence to support their findings that the beneficiary was residing in a skilled nursing facility at the time the wheelchair and accessories were provided. (UF 23.) Indeed, the Medicare Appeals Council’s sole basis for its decision was legal reasoning. The Medicare Appeals Council reasoned that: “Assessed in the context of the applicable coverage authorities, the record indicates that, on the date of service in issue, the beneficiary was a long term resident in a SNF, as defined in section 1819(a)(1).” (UF 33.) The Medicare Appeals Council concluded that: “Contrary to the ALJ’s conclusion, Medicare Part B coverage of the wheelchair and accessories at issue is barred by statute, because those items do not meet the definition of items used in the home under section 1861(n).” (UF 34.) Because Burwell presented legal reasoning, but no evidence to support her August 14, 2015 decision, this decision is not supported by substantial evidence. E. Burwell’s August 14, 2015 decision is not in accordance with law The APA requires federal courts to set aside agency action that is ‘not in accordance with law,’ which means any law, and not merely those laws that the agency itself is charged with administering. Hydro Res., Inc. v. United States EPA, 608 F.3d 1131, 1145 (10th Cir. 2010) (citation and internal quotation marks omitted). Only questions of fact are subject to the “arbitrary and capricious” standard of review; questions of law are freely reviewable. Department of Wildlife Conservation v. Jantzen, 621 F.Supp. 838, 840 (S.D. Miss. 1985) (citations and internal quotation marks omitted). This case has similarities to In Home Health, Inc. v. Shalala, 188 F.3d 1043 (8th Cir. 1999). Like in In Home Health, the case involved the Secretary of Health and Human Services and Medicare reimbursement. In Home Health, supra, 188 F.3d at 1044. The district court in In Home Health found that the Secretary’s interpretation of the Medicare Act was contrary to the language of the statute. Id. The district court granted In Home’s motion to declare unlawful and set aside the Secretary’s decision, and the Court of Appeal affirmed. Id. Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 22 of 26 Page ID #:363 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 14 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 As discussed in Section III.C.3, supra, the Medicare Act is clear in its exclusionary mandate—“Notwithstanding any other provision of this title, no payment may be made under Part A or Part B for any expenses incurred for items or services—which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, . . .” 42 U.S.C. § 1395y(a)(1)(A) (emphases added). Burwell’s reliance on the definition of “durable medical equipment,” in section 1861(n) of the Social Security Act (42 U.S.C. § 1395x(n)) is not based on a permissible construction of the overall statutory scheme of the Medicare Act. Burwell’s prioritizing the definition of “durable medical equipment” over the fundamental “reasonable and necessary” requirement is contrary to law. This Court should come to the same conclusion as the In Home Health court—Burwell’s interpretation of the Medicare Act is ‘not in accordance with law,’ because it is contrary to the language of the statute. F. Burwell’s August 14, 2015 decision is an abuse of discretion The Ninth Circuit has explained that: Where consideration of the language, purpose and history of a statute indicate that action taken thereunder has been committed to agency discretion: (1) a federal court has jurisdiction to review agency action for abuse of discretion when the alleged abuse of discretion involves violation by the agency of the constitutional, statutory, regulatory or other legal mandates or restrictions; (2) but a federal court does not have jurisdiction to review agency action for abuse of discretion when the alleged abuse of discretion consists only of the making of an informed judgment by the agency. Ness Investment Corp. v. United States Dept. of Agriculture, 512 F.2d 706, 715 (9th Cir. 1975); Strickland v. Morton, 519 F.2d 467, 471 (9th Cir. 1975). Burwell is responsible for specifying those services that are covered under the “reasonable and necessary” standard (see 42 U.S.C. 1395ff(a)), and has wide discretion in selecting the means for doing so, traditionally acting through formal regulations and (informal) instructional manuals and letters. Yale-New Haven Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 23 of 26 Page ID #:364 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 15 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Hosp., supra, 470 F.3d at 73 (citing Heckler, supra, 466 U.S. at 617). Burwell’s action in the present case, via the August 14, 2015 decision to deny Medicare coverage, is committed to agency discretion. Burwell abused her discretion by violating the statutory mandates and restrictions inherent in the Medicare Act. As discussed in Section III.C.3, supra, the Medicare Act is clear in its exclusionary mandate—“Notwithstanding any other provision of this title, no payment may be made under Part A or Part B for any expenses incurred for items or services—which . . . are not reasonable and necessary for the diagnosis or treatment of illness or injury or to improve the functioning of a malformed body member, . . .” 42 U.S.C. § 1395y(a)(1)(A) (emphases added). Burwell’s reliance on the definition of “durable medical equipment,” in section 1861(n) of the Social Security Act (42 U.S.C. § 1395x(n)) is not based on a permissible construction of the overall statutory scheme of the Medicare Act. Burwell’s prioritizing the definition of “durable medical equipment” over the fundamental “reasonable and necessary” requirement is thus a violation of the statutory mandates and restrictions inherent in the Medicare Act, and an abuse of discretion. G. Burwell’s August 14, 2015 decision is arbitrary and capricious In order to avoid being deemed “arbitrary and capricious,” an agency decision must be rational. Puerto Rico Sun Oil Co. v. EPA, 8 F.3d 73, 77 (1st Cir. 1993). A reviewing court may not set aside an agency rule that is rational, based on the consideration of the relevant factors, and within the scope of the authority delegated to the agency by the statute. Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983). The scope of review under the “arbitrary and capricious standard” is narrow and a court is not to substitute its judgment for that of the agency. Id. Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action, including a “rational connection between the facts found and the choice made.” Id. (citation Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 24 of 26 Page ID #:365 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 16 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 omitted). Normally, an agency rule would be arbitrary and capricious if the agency has relied on factors which Congress has not intended it to consider, entirely failed to consider an important aspect of the problem, offered an explanation for its decision that runs counter to the evidence before the agency, or is so implausible that it could not be ascribed to a difference in view or the product of agency expertise. Motor Vehicle Mfrs. Ass’n, supra, 463 U.S. at 43. The reviewing court should not attempt itself to make up for such deficiencies; it may not supply a reasoned basis for the agency’s action that the agency itself has not given. Id. (citation omitted). The reviewing court will, however, “uphold a decision of less than ideal clarity if the agency’s path may reasonably be discerned.” Id. (citations omitted). Although Burwell is given wide discretion to interpret the Medicare Act and promulgate rules and regulations, there is not a rational connection between the facts and Burwell’s ultimate conclusion that there was a purported error of law. Burwell’s legal analysis came out of left field, and on its own motion. (UF 27, 30.) ALJ Gutierrez reviewed the documentation submitted by Cair Medical and the testimony of Todd Tucker. (UF 22.) ALJ Gutierrez pointed out that neither the contractor nor the QIC provided evidence to support their findings that the beneficiary was residing in a skilled nursing facility at the time the wheelchair and accessories were provided. (UF 23.) ALJ Gutierrez found that Cair Medical provided a letter from the facility which clearly outlines that the beneficiary was at the skilled nursing facility under custodial care on the date of service; and that the printouts from the contractor portal confirmed that the Medicare beneficiary was discharged from a skilled nursing facility stay on March 10, 2011, and had not been under a Part A stay since that time. (UF 24.) ALJ Gutierrez concluded that Medicare beneficiary N.T. was not under a Part-A episode of care on June 8, 2011, and the wheelchair and accessories are covered by Medicare; therefore, Cair Medical was entitled to Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 25 of 26 Page ID #:366 PLAINTIFF CAIR MEDICAL, INC.’S MOTION FOR SUMMARY JUDGMENT 17 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 payment at the Medicare allowable amount for the DME provided. (UF 25-26.) In reviewing the Medicare Act, Burwell entirely failed to consider a basic, and fundamentally important aspect of the problem: the statutory scheme itself. Not only does Burwell’s explanation for its August 14, 2015 decision run counter to the evidence before the agency, it also runs counter to the law, as discussed in Section III.E., supra. This Court should not attempt to make up for Burwell’s deficiencies; it should hold that Burwell’s August 14, 2015 decision is arbitrary and capricious. IV. CONCLUSION For the foregoing reasons, Cair Medical respectfully requests that judgment be entered in its favor, holding unlawful and setting aside Burwell’s August 14, 2015 action, findings, and conclusions; and remanding this action to Burwell with instruction to have the Medicare contractor process the claim to Cair Medical in accordance with ALJ Gutierrez’ April 6, 2015 decision. Alternatively, Cair Medical respectfully requests that judgment be entered in its favor, reversing Burwell’s August 14, 2015 decision and remanding the case for rehearing. DATED: July 11, 2016 Respectfully submitted, KHOURI LAW FIRM By: /s/ Andrew B. Goodman MICHAEL J. KHOURI Email: mkhouri@khourilaw.com ANDREW B. GOODMAN Email: agoodman@khourilaw.com Attorneys for plaintiff, CAIR MEDICAL, INC. Case 8:15-cv-01677-DOC-KES Document 22 Filed 07/11/16 Page 26 of 26 Page ID #:367 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL J. KHOURI, ESQ. [SBN 97654] Email: mkhouri@khourilaw.com ANDREW B. GOODMAN, ESQ. [SBN 267972] Email: agoodman@khourilaw.com KHOURI LAW FIRM 4040 Barranca Parkway, Suite 280 Irvine, California 92604 Telephone: (949) 336-2433 Fax: (949) 387-0044 Attorneys for plaintiff CAIR MEDICAL, INC. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION CAIR MEDICAL, INC., a California corporation, Plaintiff, vs. SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, Defendant. Case No. 8:15-cv-01677-DOC-KES PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW [Notice of Motion, Memorandum of Points and Authorities, and [Proposed] Judgment submitted concurrently] Hearing date: September 26, 2016 Time: 8:30 AM Place: Courtroom 9D Judge: Hon. David O. Carter /// Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 1 of 11 Page ID #:368 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 TO ALL PARTIES AND THEIR ATTORNEYS OF RECORD: Under L.R. 56-1, plaintiff CAIR MEDICAL, INC. (“Cair Medical”), as the moving party on the present Motion for Summary Judgment, submits this Statement of Uncontroverted Facts and Conclusions of Law. References to the Certified Administrative Record (“CAR”), filed electronically and placed under seal (See Documents 17, 19), do not reveal names, dates of birth, Social Security numbers, or any other patient-identifying or confidential information. STATEMENT OF UNCONTROVERTED FACTS SUF #/Undisputed Fact Evidence 1. Cair Medical’s business is 100 percent tilt-space manual wheelchairs, and only in skilled nursing facilities for Medicare patients. CAR 0193 at lines 16-18. 2. To verify a patient’s eligibility – because Cair Medical can only bill Medicare Part B, and that status changes often – before Cair Medical even starts the process, they contact the billing department at a skilled nursing facility, and get something in writing saying that the patient is on Medicare Part B custodial care. CAR 0193 at lines 3-8. 3. Cair Medical will even cross check the skilled nursing facility’s written representation with the Connex website. CAR 0193 at lines 8-12. 4. Cair Medical’s process of verifying CAR 0193 at lines 19-21. Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 2 of 11 Page ID #:369 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 3 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 patients’ status and eligibility for Medicare Part B is standard operating procedure. 5. Patient N.T.’s last day on Medicare Part A at Meadowood Nursing Center was March 10, 2011, as also confirmed on the Connex website. CAR 0100, 0102, 0104, 0173, 0194 at lines 8-19. 6. Patient N.T. was evaluated for a custom tilt-in space wheelchair on or around May 24, 2011 at Meadowood Nursing Center. CAR 0128-0129. 7. The medical evaluation of patient N.T. concluded that N.T. would require a manual tilt-in space wheelchair with custom seating and back supports. CAR 0120-0127. 8. Cair Medical verified in writing that Patient N.T. was under a long-term care, distinct custodial Medicare Part B stay on June 8, 2011 at Meadowood Nursing Center. CAR 0100; see also Document 1-1, Exhibit 1 to the Complaint. 9. On June 8, 2011, Cair Medical provided patient N.T. with a manual tilt- in space wheelchair, billed Medicare for Durable Medical Equipment (“DME”), and was initially reimbursed for the charges. CAR 0004, 0119, 0130. 10. On November 21, 2011, Noridian Administrative Services sent Cair CAR 0162-0169. Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 3 of 11 Page ID #:370 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 4 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Medical notification of a Medicare payment error, which resulted in an overpayment determination for patient N.T. (and others) because records indicated that the patient was a resident of a skilled nursing facility on the date of service billed. 11. Cair Medical subsequently submitted a redetermination request with supporting documentation, which was received on January 6, 2012 by Noridian Administrative Services. CAR 0157, 0170-0174. 12. On February 2, 2012, Cair Medical received an unfavorable decision on its redetermination from Noridian Administrative Services regarding the $3,678.65 overpayment amount for Medicare beneficiary N.T. CAR 0156-0161. 13. On February 28, 2012, Cair Medical submitted a formal reconsideration request via letter to C2C Solutions, Inc. CAR 0151-0155. 14. On June 1, 2012, C2C Solutions, Inc. issued an unfavorable decision on Cair Medical’s appeal. CAR 0141-0150 (Note: CAR 0141 and 0143 are numbered consecutively, but the Bates stamps are cut off.) 15. On July 26, 2012, Cair Medical submitted a Request for Medicare Hearing by an Administrative Law Judge. CAR 0137-0140. Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 4 of 11 Page ID #:371 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 5 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 16. Todd Tucker, president of Cair Medical, appeared on behalf of Cair Medical before ALJ Roberto Gutierrez on August 26, 2014 for a de novo hearing, in which the QIC was provided written notice but did not respond. CAR 0186-0187, 0190 at lines 19-24. 17. ALJ Gutierrez admitted Exhibits 1 (procedural documents), 2 (medical records), and 3 (notice of hearing) into the record without objection. CAR 0191 (lines 14-18) – 0192 (lines 8- 10). 18. Mr. Tucker testified on behalf of Cair Medical that, according to section 3, p. 29 of Medicare’s medical coverage of durable medical equipment and other devices, a long-term care facility can qualify as your home, which was what patient N.T. was in. CAR 0195 (lines 19-25) – CAR 0196 (line 1). 19. Mr. Tucker further testified on behalf of Cair Medical by referring to section 1, p. 25, chapter 20 of the Medicare Claims Processing Manual. CAR 0196 at lines 1-7. 20. Mr. Tucker additionally testified that Cair Medical had a letter from the director of nursing stating that, at the time, the patient was definitely in a distinct unit. CAR 0196 at lines 7-9; see also CAR 0100. 21. On April 6, 2015, ALJ Gutierrez issued a fully favorable decision to Cair CAR 0088-0093. Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 5 of 11 Page ID #:372 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 6 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Medical, in which he directed the Medicare contractor to process the claim in accordance with his decision. 22. ALJ Gutierrez reviewed the documentation submitted by Cair Medical and the testimony of Todd Tucker. CAR 0092 (under “Analysis”). 23. ALJ Gutierrez pointed out that neither the contractor nor the QIC provided evidence to support their findings that the beneficiary was residing in a skilled nursing facility at the time the wheelchair and accessories were provided. CAR 0092 (under “Analysis”). 24. ALJ Gutierrez found that Cair Medical provided a letter from the facility which clearly outlines that the beneficiary was at the skilled nursing facility under custodial care on the date of service; and that the printouts from the contractor portal confirmed that the Medicare beneficiary was discharged from a skilled nursing facility stay on March 10, 2011, and had not been under a Part A stay since that time. CAR 0092 (under “Analysis”). 25. ALJ Gutierrez found that based on this evidence, Medicare beneficiary N.T. was a long-term resident at the CAR 0092 (under “Analysis”). Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 6 of 11 Page ID #:373 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 7 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 facility and not under a Part-A stay on the June 8, 2011 date of service. 26. ALJ Gutierrez concluded that Medicare beneficiary N.T. was not under a Part-A episode of care on June 8, 2011, and the wheelchair and accessories are covered by Medicare; therefore, Cair Medical was entitled to payment at the Medicare allowable amount for the DME provided. CAR 0093 (under “Conclusions of Law”). 27. On May 29, 2015, Medicare’s Administrative Qualified Independent Contractor (AdQIC) referred ALJ Gutierrez’ April 6, 2015 decision and related claim file to the Medicare Appeals Council for possible review on the Council’s own motion. CAR 0074. 28. The AdQIC reasoned, in its May 29, 2015 memorandum, that ALJ Gutierrez failed to: (1) first determine whether the item fell within a statutory Medicare benefit category, and (2) recognize and apply Sections 1861(n) and 1819(a)(1) of the Social Security Act, which resulted in an error of law material to the outcome of Cair Medical’s claim. CAR 0085 (third paragraph, second sentence and last sentence; fourth paragraph, first sentence). 29. On or around June 17, 2015, Cair Medical, through counsel, submitted CAR 0013-0073; see also Document 1- 2, attached as Exhibit 2 to the Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 7 of 11 Page ID #:374 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 8 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 written exceptions to the AdQIC’s May 29, 2015 referral to the Medicare Appeals Council, and provided documentation for why there was no error of law material to the outcome of Cair Medical’s claim. Complaint. 30. On August 14, 2015, the Medicare Appeals Council notified Cair Medical that, on its own motion, it decided to review ALJ Gutierrez’ April 6, 2015 decision. CAR 0001-0003 (first sentence, CAR 0003). 31. The Medicare Appeals Council stated that, “[t]he Council has received no response from the appellant.” CAR 0004 (first sentence, top of page). 32. The record reflects that Cair Medical served the AdQIC and Medicare Appeals Council with its written exceptions via mail on June 18, 2015, and they were received on June 23, 2015. CAR 0013; Document 1-2 at pp. 63-64. 33. The Medicare Appeals Council reasoned that: “Assessed in the context of the applicable coverage authorities, the record indicates that, on the date of service in issue, the beneficiary was a long term resident in a SNF, as defined in section 1819(a)(1).” CAR 0009 (second full paragraph, first sentence). 34. The Medicare Appeals Council CAR 0009 (second full paragraph, Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 8 of 11 Page ID #:375 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 9 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 concluded that: “Contrary to the ALJ’s conclusion, Medicare Part B coverage of the wheelchair and accessories at issue is barred by statute, because those items do not meet the definition of items used in the home under section 1861(n).” second sentence). 35. The Medicare Appeals Council ultimately reversed ALJ Gutierrez’ decision, and found that, “the wheelchair and accessories provided to the beneficiary on June 8, 2011[] are not covered by Medicare under Section 1861(n) of the Act.” CAR 0010-0011 (under “Decision”). 36. As a result of the Medicare Appeals Council’s August 14, 2015 decision, Cair Medical was entitled to judicial review. CAR 0001. 37. After exhausting all administrative remedies, on October 19, 2015, Cair Medical timely filed a complaint in the present Court seeking judicial review of the Medicare Appeals Council’s August 14, 2015 decision. CAR 0001 (Complaint must be filed within 60 days, plus five additional days); Document 1 (Complaint). /// Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 9 of 11 Page ID #:376 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 10 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 CONCLUSIONS OF LAW 1. The Court has jurisdiction over this action under 28 U.S.C. § 1361, 42 U.S.C. § 405(g), and 42 U.S.C. § 1395ff(b)(1)(A). The amount in controversy in this action is approximately $3,678.65, which exceeds the $1,000.00 amount-in- controversy requirement for judicial review of decisions by the Secretary of HHS. 42 U.S.C. § 1395ff(b)(1)(E)(i). 2. The Medicare Appeals Council’s interpretation of the Medicare statutes and regulations at issue is not a permissible construction of the statutory scheme; thus, the Medicare Appeal Council’s interpretation, as reflected in the August 14, 2015 final agency decision, is not entitled to strong deference, if any, under Chevron v. Natural Res. Def. Council, Inc., 467 U.S. 837. 3. The Medicare Appeals Council’s August 14, 2015 final agency decision is conclusory and minimally persuasive, such that the Court should accord the decision the minimal amount of persuasiveness, if any, under Skidmore v. Swift & Co., 323 U.S. 134 (1944). 4. The August 14, 2015 Medicare Appeals Council decision is arbitrary and capricious. 5 U.S.C. § 706(2)(A). 5. The August 14, 2015 Medicare Appeals Council decision is an abuse of discretion. 5 U.S.C. § 706(2)(A). 6. The August 14, 2015 Medicare Appeals Council decision is not in accordance with law. 5 U.S.C. § 706(2)(A). 7. The August 14, 2015 Medicare Appeals Council decision is unsupported by substantial evidence. 5 U.S.C. § 706(2)(E). 8. Judgment should be entered in Cair Medical’s favor, holding unlawful and setting aside Burwell’s August 14, 2015 action, findings, and conclusions; and remanding this action to Burwell with instruction to have the Medicare contractor process the claim to Cair Medical in accordance with ALJ Gutierrez’ April 6, 2015 decision. 42 U.S.C. § 405(g). Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 10 of 11 Page ID #:377 PLAINTIFF CAIR MEDICAL, INC.’S STATEMENT OF UNCONTROVERTED FACTS AND CONCLUSIONS OF LAW 11 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 9. Alternatively, judgment should be entered in Cair Medical’s favor, reversing Burwell’s August 14, 2015 decision and remanding the case for rehearing. 42 U.S.C. § 405(g). DATED: July 11, 2016 Respectfully submitted, KHOURI LAW FIRM By: /s/ Andrew B. Goodman MICHAEL J. KHOURI Email: mkhouri@khourilaw.com ANDREW B. GOODMAN Email: agoodman@khourilaw.com Attorneys for plaintiff, CAIR MEDICAL, INC. Case 8:15-cv-01677-DOC-KES Document 22-1 Filed 07/11/16 Page 11 of 11 Page ID #:378 [PROPOSED] JUDGMENT 1 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 MICHAEL J. KHOURI, ESQ. [SBN 97654] Email: mkhouri@khourilaw.com ANDREW B. GOODMAN, ESQ. [SBN 267972] Email: agoodman@khourilaw.com KHOURI LAW FIRM 4040 Barranca Parkway, Suite 280 Irvine, California 92604 Telephone: (949) 336-2433 Fax: (949) 387-0044 Attorneys for plaintiff CAIR MEDICAL, INC. UNITED STATES DISTRICT COURT FOR THE CENTRAL DISTRICT OF CALIFORNIA – SOUTHERN DIVISION CAIR MEDICAL, INC., a California corporation, Plaintiff, vs. SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services, Defendant. Case No. 8:15-cv-01677-DOC-KES [PROPOSED] JUDGMENT [Notice of Motion, Memorandum of Points and Authorities, and Statement of Uncontroverted Facts and Conclusions of Law submitted concurrently] Hearing date: September 26, 2016 Time: 8:30 AM Place: Courtroom 9D Judge: Hon. David O. Carter On September 26, 2016 at 8:30 AM, in Courtroom 9D of the above-entitled Court, located at 411 West Fourth Street, Santa Ana, CA 92701-4516, plaintiff CAIR MEDICAL, INC. (“Cair Medical”), sought judicial review of the final agency action of defendant SYLVIA MATHEWS BURWELL, in her official capacity as Secretary of the United States Department of Health and Human Services (“Burwell”). See 42 U.S.C. § 1395ff(b)(1)(A); 42 U.S.C. § 405(g). On August 14, 2015, Burwell’s final agency action ultimately reversed a fully Case 8:15-cv-01677-DOC-KES Document 22-2 Filed 07/11/16 Page 1 of 2 Page ID #:379 [PROPOSED] JUDGMENT 2 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 favorable Administrative Law Judge’s (“ALJ”) decision that allowed approximately $3,678.65 in reimbursement to Cair Medical under the Medicare Program. After full consideration of the briefs; the Certified Administrative Record; oral argument of counsel; and any other evidence taken under submission, for good cause appearing, IT IS HEREBY ORDERED THAT Judgment is entered in favor of Cair Medical. Burwell’s August 14, 2015 action, findings, and conclusions are set aside; and this action is remanded to Burwell with instruction to have the Medicare contractor process the claim to Cair Medical in accordance with ALJ Gutierrez’ April 6, 2015 decision. Alternatively, Burwell’s August 14, 2015 decision is reversed and remanded for rehearing. Legal fees and costs of suit are awarded to Cair Medical. IT IS SO ORDERED. DATED: _________________ ___________________________________ Hon. David O. Carter United States District Judge DATED: July 11, 2016 Prepared by, KHOURI LAW FIRM By: /s/ Andrew B. Goodman MICHAEL J. KHOURI Email: mkhouri@khourilaw.com ANDREW B. GOODMAN Email: agoodman@khourilaw.com Attorneys for plaintiff, CAIR MEDICAL, INC. Case 8:15-cv-01677-DOC-KES Document 22-2 Filed 07/11/16 Page 2 of 2 Page ID #:380